Measures announced by the Government in yesterday’s Finance Bill could 'put a brake on' the growth of ultra-low emission vehicles until 2020, warns Alphabet.
New BIK tax rates were introduced and these will see the tax paid by employers and employees fall dramatically for the cleanest cars from 2020.
The BIK rate for a pure EV currently stands at 7% for 2016/17, rising to 9% in 2017/18, 13% in 2018/19 and 16% in 2019/20.
However, the changes confirmed in this week's Finance Bill show that in 2020/21 the BIK rate falls from 16% to just 2%.
The government will legislate in the bill to remove the Income Tax and employer NICs advantages of salary sacrifice schemes. The taxable value of benefits in kind where cash have been forgone will be fixed at the higher of the current taxable value or the value of the cash forgone. Employer NIC savings remain for vehicles under 75g/km.
ULEVs will continue to qualify, while any existing employer-provided car schemes made before April 2017 will be protected until April 2021.
The Finance Bill confirmed that the changes will apply to arrangements where the employee forgoes cash in exchange for a benefit in kind, including salary sacrifice arrangements, flexible benefit packages with a cash alternative and BIKs where there is an option to take a cash allowance instead.
The Government says it will tax whichever is the greater amount; the benefit-in-kind value of the car or the cash allowance sum offered.
Matt Sutherland, chief operating officer at Alphabet GB, said: “Even after providing more detail to the Chancellor’s autumn statement with yesterday’s Finance Bill, there are still more questions than answers surrounding the future of vehicle fleets for UK business and public sector organisations.
“The concerns that Alphabet and our customers have are around the clarity and apparent lack of joined-up thinking towards company car taxation and ULEVs; which ultimately means significant concerns exist around the unintended consequences which will result from these decisions.
“The Government has clearly expressed a pro-business agenda and an ambition to be at the global forefront of ULEVs, but the consequences of these announcements is likely to put a brake on the growth of ULEVs as company cars until 2020.
“Effectively they are removing the incentives to take a ULEV for the next three years – especially those for low paid, ‘JAM’ workers.
“Significant practical questions around EVs as company cars remain, for instance we are still awaiting a decision from HMRC on advisory fuel rates (AFRs) rates for electricity as a fuel type.
“The company car market has delivered real impetus and growth to ULEVs over the past few years – far outstripping private registrations of ULEVs.
“Our fear is that the consequences of this autumn statement will be a significant flight from new, efficient company cars into cash alternatives and grey fleet.
“We know from the recent BVRLA and Energy Saving Trust research the result of this will be older, more polluting and less safe vehicles on UK roads – surely a retrograde move for business, consumers and society?
“Hence our feeling is one of disappointment - big questions still remain unanswered and there are significant concerns around the unintended consequences for ULEVs from the autumn statement.”
- For analysis of the Finance Bill, see the December 8 issue of Fleet News